3 Property Stocks To Monitor In 2018

Singapore’s property developers are close to finishing the year as one of the top performers in Singapore’s market. The property sector is up by 30 percent year-to-date. DBS feels that improving macro factors will continue to support Singapore’s property, which will in turn drive share prices of developers.

Multi-Year Recovery Trend To Start From 2018

DBS is expecting a price recovery of three to five percent per annum over the next two years. Transaction value for properties is forecasted to hit $40 billion (up 40 percent year-on-year) for FY2017, $42.2 billion for FY2018 (up 5 percent year-on-year) and $44.3 billion for FY2019 (up 5 percent year-on-year) for the total private residential market, according to DBS.

Aggressive Landbanking To Continue In 2018

Developers are already pricing in a recovery in prices in 2018. This is evident from the way developers have been acquiring land through the Government Land Sales (GLS) and collective-sale market (en-bloc deals) in 2017. 2017 was the most active landbanking year for developers since 2013. Heading into 2018, developers will continue to be aggressive (but selective). DBS estimates that 60 percent of new launches in 2018 will come from redeveloped enbloc sites, which are mostly in matured estates.

Strategy For Investing In Property Players In 2018

DBS stresses that the next leg of re-rating for property plays will likely be stock-specific. It will mainly be driven by developers’ ability to achieve strong sell-through rates when projects are launched in 2018. DBS also notes that developers which have successfully landbanked will also see its share price move significantly as Revised Net Asset Value (RNAV) expectations are being driven higher. DBS believes that developers’ share prices have the potential to reach a 0.9 times their RNAV in 2018.

Among the universe of property plays in Singapore, there are three particular developers that DBS picked out based on its strategy: City Developments, Roxy Pacific Holdings and UOL Group.

1. UOL Group

With its shares trading at 0.8 times price-to-NAV post-consolidation of United Industrial Corporation, DBS views UOL Group (UOL) as an attractively valued property play. The Raintree Gardens and land sites along Meyer/Amber Road that UOL recently purchased through enbloc will likely see strong buyer interest upon their launch. This could provide catalyst for re-rating of UOL.

BUY, Target Price $10.15 (Current share price: $8.74)

2. City Developments

According to DBS, City Developments is a key proxy to the revival of Singapore’s property market. City Development’s catalyst will come from the robust pipeline of projects to be launched in 2018 and beyond. City Developments is already preparing for the launch of New Futura, an 861-unit suburban condominium in Tampines and the soft launch of South Beach Residences. City Developments has historically traded up to 1.2 to 1.3 times price-to-NAV, which translates to a target price of $14.30.

BUY, Target Price $14.30 (Current share price: $12.37)

3. Roxy-Pacific Holdings

DBS foresees Roxy-Pacific Holdings (Roxy-Pacific) to achieve strong sell-through rates for Roxy Pacific’s seven projects in Singapore. This will generate more than $0.5B in pre-sales for Roxy Pacific. DBS notes that Roxy Pacific has also been building up its recurring income portfolio. DBS believes that this will contribute positively to its income from 2018 onwards.